The surge in battery demand for both mobility and stationary applications necessitates a critical examination of the environmental impacts associated with battery material production and disposal. Key components such as cathodes, anodes, separators, and electrolytes contribute to environmental degradation throughout their supply chain, emphasizing the urgency for sustainable solutions. Circular economy principles offer a strategic framework for mitigating these impacts by promoting extended product lifecycles and increased utilization of recycled materials. This paradigm shift aims to minimize resource extraction and waste generation, thereby reducing greenhouse gas emissions, toxic exposure, and resource depletion. While challenges persist in achieving perfect circularity due to technical and logistical complexities, embracing the circular economy presents a promising avenue for enhancing sustainability in battery manufacturing and usage. The optimization of hydromechanical Li-ion battery recycling systems involves a multifaceted process encompassing material flow analysis and various mechanical, physical, and metallurgical processing units. The Simulation models utilizing advanced software aid in understanding material composition and flow dynamics, crucial for applying Design for Recycling Principles. Exergy calculation within a thermoeconomic framework further evaluate resource efficiency of the recycling route, and analytical techniques such as ICP-OES and XRD analysis play pivotal roles in identifying complex constituents and guiding process optimization. Regenerated lithium salt assumes integral significance in NMC battery production. This paper underscores the importance of efficient material recovery and recycling in sustainable battery production, emphasizing its critical role in meeting the demands of a greener future.